A long-time controversial approach to investing in communities
There are multiple points of view between gentrifying a neighborhood and revitalizing one. A lot of words like segregation, colonialism, and racism are often used when discussing these two points. I’m not here to discuss these concepts and will leave that to sociologists. My goal is to visit both ideas from an investor’s and a realtor’s position and hopefully, help you consider what value each option has and which is best for you or your clients.
Some believe that gentrifying, while reducing crime, brings in only upper income buyers and businesses, while at the same time, eliminating all lower income buyers and businesses. Many feel that it destroys the availability of lower income housing and a sense of community, including the Mom and Pop businesses that often thrive in these areas.
Revitalizing a neighborhood helps those already in place to live in better homes, and run businesses in better quality retail space, while keeping the rents low. It often lowers the crime rate and does not break down the sense of community that is well established and vital in these areas.
Investors and homeowners moving into older, run-down areas, can have the ability to buy older, often historic buildings, many that are boarded up and long abandoned, at low costs and turn them into high-end properties. This continues to bring in other higher end, higher income individuals and businesses, like clothing stores, restaurants, bars, and yoga studios that support that lifestyle. Simply speaking, it brings in people and businesses with money. Property values and taxes increase, home costs increase, and the neighborhoods become exclusive. This is good investing. Or is it?
The controversy is apparent. What happens to the individuals who lived there before? Where do they live and shop and play when their neighborhoods are remodeled, upgraded, and unaffordable?
They move into other low-income areas. This then causes overcrowding. And when there’s no retail space available for those businesses once supported by their previous community, what are these business owners to do? Crime increases, unemployment becomes rampant, schools are underfunded, and the overall quality of life deteriorates.
From the point of view of an investor or even the lover of historic homes, gentrification seems like a great idea. Old historic buildings, houses that have been abandoned and boarded up are a great opportunity to buy low and sell high. This is the goal of a real estate investor. Saving beautiful old architecture from deterioration and eventual destruction is a passion many have. Others like to tear them down and start fresh with modern architecture. Is this a bad thing? Have these individuals thought about the negative community effects? Do they care? Should they care?
There are also investment benefits in revitalization. Building or refurbishing affordable homes means spending less on finishes and overall building expenses. It requires a smaller budget …….